Sanlam AR holdouts told to go restricted to cut fees

Sanlam AR holdouts told to go restricted to cut fees

Twenty-two appointed representatives of Sanlam have been told they must become restricted advisers, advising solely on Sanlam products, if they are to benefit from a reduced fee.

Last month (February 12), Financial Adviser reported Sanlam hit its adviser companies with a change to its fee model, which will see all appointed representatives charged a minimum of £20,000 regardless of turnover.

Eight companies decided to leave as a result, while the remaining 22 affected have been looking at ways to reduce their fees to minimise the impact of the charge, which comes into force from April.

Financial Adviser has since spoken with two advisers, who wish to remain anonymous. They have both claimed a Sanlam representative told them that, to drop the new fees to the level they are currently paying – approximately £10,000 – they would have to put clients’ money into Sanlam and essentially become restricted, only advising on Sanlam products.

If not, then they would have to pay the full £20,000 fee.

So far 16 advisers have agreed to pay the extra fees.

One of the advisers, who spoke with Financial Adviser, said they were unprepared to do this, while the other deemed this proposal “disgraceful”.

One said: “While it is understandable Sanlam needs to make a profit, the blunt instrument of a minimum £20,000 a year fee is painful, especially when there is no improved service on offer in return, no additional systems, nothing to sweeten the bitter pill.

“The fee hike can be avoided if appointed representatives become restricted advisers using Sanlam products only, and transferring £7m of funds to Sanlam products.”

But John White, chief executive of wealth management at Sanlam, disputed the £7m figure, stating there was no set amount that needed to be moved into Sanlam funds.

Mr White also said restricted advice would only apply to ongoing advice, not to existing clients.

He said: “[Moving to a restricted model] the adviser would continue to advise on the client’s existing policies and investments and would lead on Sanlam products and investments on ongoing advice.”

He added: “A restricted adviser can advise on the full range of Sanlam funds including multi-asset risk-graded open-ended investment companies, an active and passive model portfolio service with full risk-graded options, and bespoke discretionary fund management.

“Where there are any gaps in available funds to meet the client’s needs the adviser, subject to their licensing, can access the whole of the market.”

Sanlam will assess each company that wants to move to a restricted model to benefit from lower fees, to see whether it is a viable move.

It will look at turnover and client assets, among other metrics, to see whether the company is able to generate business and will reduce fees if it is a viable solution both for the company and Sanlam.

Those companies who do not fit the restricted model, perhaps because they are too small, are able to stay in the network, but will have to pay the increased fees.